Reasons For Requesting Reasonable Cause Penalty Abatement

Did you know? The Internal Revenue Service (IRS) assesses around ​39 million penalties each year​, but only 11% are abated. And that is only because many don’t request or know how to request abatement.

If you have ever found yourself owing the IRS money for previous tax years, then you probably know the penalties and interest that come with it. Such additional penalties that are assessed on top of the tax debt, like a late-filed return or late estimated tax payment, can go unpaid for a long time. These penalties can add up pretty quickly. However, there are options for having them removed, one of which is reasonable cause penalty abatement (RCPA).

There are several circumstances which qualify a taxpayer for reasonable cause penalty abatement, such as:

1. Death, Serious Illness, or Unavoidable Absence

These are probably the most obvious and logical circumstances that warrant penalty abatement, and it pertains to either the taxpayer himself or his immediate family member (spouse, child, parent, brother, sister, grandparents, grandchildren, step-children, step-parents, step-brother/sister, step-grandparents).

Corporations can also qualify for RCPA under these circumstances, in the instance where a taxpayer who has sole authority over making tax deposits, executing returns, or paying the tax due for the corporation has suffered death, serious illness, or unavoidable absence (or someone from his immediate family).

2. Fire, Casualty, or Natural Disaster

Another qualifying factor for RCPA is if a natural disaster affected the taxpayer. That can be any type of disaster that warrants assistance from the Federal Government. The requirements for this type of RCPA are:

● The taxpayer’s residence or business is located in the covered disaster area
● The taxpayer’s tax documents are in a covered disaster area
● The taxpayer’s spouse is located within the covered disaster area (in case of filing a joint return)
● The taxpayer is a relief worker in the covered disaster area

If the taxpayer is deemed ‘unaffected person’ but due to a fire, casualty, or other unfavorable situation was unable to file their return on time, make estimated tax payments, or pay their balance, they may still qualify for RCPA.

3. Taxpayer is Unable to Obtain Records

The taxpayer can request RCPA if they can show they were unable to obtain the records necessary to file their return, make tax payments, or pay their balance. These kinds of circumstances are judged on a case by case basis. Typically, reasonable cause is established if the taxpayer who has previously exercised business care and prudence was unable to comply due to circumstances beyond their control.

Takeaway

If you believe you qualify for RCPA, you should know that supporting documentation is essential to having your request accepted. The most important issue is whether or not the situation was out of your control. Additionally, you should only include relevant information in your request. For best results, you should work with a tax relief professional who can offer you proper guidance. If you would like to learn more about penalty relief, contact ​Golden Tax Relief​ and get more information about the facts that establish a reasonable cause.

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